TPP – Fast Track Looks On Course

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VSH [M-PF 2.1%] – Huge growth potential on the horizon but low ROE

June 2015
(HSC strategy and macro report )

Now for a final Senate revote – The Senate overnight passed a critical procedural vote related to TPA by 60-37. This clears the way for a final vote on TPA today. And a simple majority will do this time. A few weeks ago, the Senate passed an earlier version of the trade bill which combined both TPA & TAA. Now they have to pass the TPA only version. This may take a little time as the Democrats will still like to pass a version of TAA also. Once done TPA would then go to the President for signature.

House of Representatives finally passed TPA – U.S. House of Representatives on Thursday June 18th passed a revised trade bill including only TPA this time in a 218-208 vote. The revised bill will now head to the Senate for a revote there as well. The bill was passed with the support of just 28 Democrats. Success was achieved by stripping out TAA (worker aid program) from the trade bill, however this also means that the earlier Senate vote to pass a previous version of the trade bill is now moot. And will have to be repeated. In any event passage through the House of Representatives was always going to be the toughest part and with this achieved the chances of a successful outcome to TPP has been greatly augmented. If the Senate vote goes well then the President is likely to sign it. And this should clear the way for final negotiations on TPP where many countries have been holding back on making key final concessions ahead of the Congress vote on TPA.

The Ministry of Planning and Investment (MPI) recently estimated that FY2015 GDP will be up by 5.93% y/y. Just above government targets and just below our latest forecast.

We had originally hoped to go for a more aggressive number this year as most of the macro indicators suggest that the economic recovery is gathering speed. Inflation is the lowest we have seen; credit growth is faster than we have seen since 2010 and exports are popping. However while we can see a pickup in most GDP segments next year, there will be reduced activity in the mining segment. Oil & gas account for over 70-80% of this segment.

When looking at our assumptions for FY2015 GDP growth we had to ask ourselves two main questions; how much can manufacturing and construction speed up? And how much of a drag will oil be on the numbers.

These submissions are extracted from reports accomplished by Ho Chi Minh City Securities Corporation (HSC)’s Research Division team led by Fiachra Mac Cana, Managing Director, Head of Research

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